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Lawyers for Bombardier and Metrolinx will face off in a University Ave. courtroom Tuesday morning in a hearing over the fate of the two parties’ troubled $770-million light rail vehicle contract.

In a high-stakes legal battle pitting the iconic Canadian rail manufacturer against the province’s regional transit agency, Metrolinx is accusing Bombardier of exposing it to “massive financial consequences and reputational damage” by allegedly defaulting on the order for 182 LRVs.

The pilot vehicle for the Eglinton Crosstown. Bombardier says it has reached an important testing milestone, while Metrolinx is refusing to certify it and says it lacks basic functionality. (Randy Risling / Toronto Star)

Bombardier claims the company has addressed its production problems and will be able supply the new fleet in time for Metrolinx to open LRT lines on Eglinton Ave. and Finch Ave. West as planned.

The company is seeking an injunction to prevent Metrolinx from terminating the contract. Bombardier says if the application isn’t granted the company will suffer “irreparable harm” to its finances, international reputation and employees.

In a factum filed to support its case, the company alleges that Metrolinx is attempting to get out of the deal because the agency no longer needs all the vehicles it agreed to buy. Metrolinx rejects the claim in a factum of its own. Neither document has been tested in court.

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Central to Bombardier’s argument is that under former mayor Rob Ford, city council threw the LRV deal into disarray by cancelling the Scarborough LRT. The line would have replaced the existing Scarborough RT and been operated with 48 of the cars from the Bombardier order.

The other lines the trains would serve were the Eglinton Crosstown, Finch West and Sheppard East projects. All four were part of the David Miller-era Transit city plan.

Metrolinx placed the order for 182 cars in June 2010, but Bombardier alleges the deal became shrouded in uncertainty just five months later when Ford won the mayoral election.

“Mayor Rob Ford was elected after promising to scrap the plans for light rail transit in Scarborough and to replace that line with a subway… Consequently, in 2011 and 2012, the future of the Transit City plan was in doubt due to political debate,” Bombardier’s factum states.

According to Bombardier, Metrolinx was so concerned about whether the LRT projects would survive that in 2011 the agency said it expected to reduce the number of LRVs it would buy.

But in March 2012, council appeared to resurrect Transit City when councillors defied Ford and voted to build an LRT instead of a subway on Sheppard. According to Bombardier, by the end of 2012 the province had agreed to a new schedule for vehicles for the opening of four lines.

However, things changed again less than a year later when council altered course and in July 2013 voted to build a subway extension to replace the Scarborough RT. The subway project was supported by Metrolinx’s masters in the provincial Liberal government.

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“This decision created a financial and political dilemma for (Metrolinx),” Bombardier’s factum states. The company claims that Metrolinx didn’t want to pay for vehicles it didn’t need, but also didn’t want to have to compensate Bombardier for removing them from the order.

In its factum the company claims the 48 vehicles were valued at $220 million to $230 million.

Although the city was expected to pick up the sunk costs associated with cancelling the LRT, Bombardier alleges that Metrolinx “was very concerned that it would have its own ‘gas plants’ scandal on its hands,” a reference to the controversy over cancelled power plants that engulfed the Liberal government around that time.

In its filing, Metrolinx dismisses Bombardier’s claims about the “surplus” Scarborough vehicles as “untrue” and “a red herring.”

Mark Ciavarro, a project director at Metrolinx, testified ahead of the hearing that the agency could make use of all of the LRVs it ordered.

According to Ciavarro, Metrolinx had discussions with the city to add the vehicles to the TTC’s streetcar order, which had also been placed with Bombardier.

Ciavarro also said Metrolinx could use the LRVs on future light rail lines in Hamilton, Mississauga or proposed extensions of the Eglinton Crosstown. “So there were a number of places where those vehicles could go,” he said.

Metrolinx alleges that it should be allowed to terminate the contract because despite “countless reassurances” there has been no “demonstrated improvement” in Bombardier’s “quality or manufacturing.”

The agency points to the fact that the first two pilot LRVs were scheduled to be completed by early 2015 but Bombardier has yet to deliver.

The agency says it “faces the prospect of massive financial losses if it is forced to persist in its failed contractual relationship with Bombardier.”

That’s because Metrolinx is responsible for paying damages to the consortium building the Crosstown line if the vehicles are late. Metrolinx claims those damages could be as high as $500,000 per day, while Bombardier is only liable to pay Metrolinx $1,500 a day for each LRV that’s delayed.

The Crosstown and Finch lines are scheduled to open in 2021, and Metrolinx says it should be allowed to terminate the Bombardier order so that it can find another supplier in time.

Metrolinx claims it’s within its legal rights to cancel the contract, but even if it wasn’t, it would be better for the courts to award monetary damages to Bombardier than to force the two parties together “in an unhappy commercial marriage that has already soured.”

Bombardier has claimed that the first pilot vehicle was ready for testing last fall, but Metrolinx refused to perform the certification tests. On Monday, Bombardier issued a press release that said the second pilot was on its way from its factory in Thunder Bay to its facility in Kingston for testing.

“These actions clearly demonstrate that Bombardier is fully capable of delivering the LRVs,” Bombardier’s project manager said in the statement.

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